Guide to Filling out Form 5500EZ

Many taxpayers with self-directed (or “solo”) 401(k) plans are aware that they may be required to file Form 5500EZ annually. This requirement begins the first year that plan assets exceed $250,000, and continues each year thereafter. The form is typically due each July, and can be found here: https://www.irs.gov/forms-pubs/about-form-5500-ez. Many taxpayers with self-directed 401(k)s file Form 5500EZ on their own, as it isn’t particularly difficult. That said, all information provided herein is educational only, and if you have any questions, contact your tax preparer.

Part I of the return is mostly self-explanatory.

In Part II, the name of the 401(k) plan goes on Line 1a, and date you signed the 401(k) adoption agreement (or later effective date of the adoption agreement) on 1c. On Line 1b, you assign the plan a three digit number. Assuming the plan is your business’ sole retirement plan, you’ll probably choose to use “001.” This number must be consistent year to year.

One Lines 2a-2d, you put the information of the sponsoring employer. The EIN that goes here is the EIN of the sponsoring employer, not the 401(k) plan’s EIN. If this is a plan for a non-LLC sole proprietor, remember to use your sole proprietorship EIN (separate from your SSN and separate from your 401(k)’s EIN).

Most self-directed 401(k)s do not have a separate third party administrator, and will therefore simply enter “Same” on line 3a, leaving lines 3b-3c blank.

Lines 4 and 5 should be self-explanatory.

On Line 6, you’ll enter the fair market value of the plan at the beginning and end of the year. It’s unlikely that your plan will have any liabilities.

On Line 7 you’ll enter the contributions made to the plan during the year. If plan participants receive a W2 from the 401(k) sponsoring employer, the participant contributions are listed on Box 12 (with codes D or AA) of each participant’s W2. Any remaining contributions deducted for the tax year which are not included on Box 12 (with codes D or AA) of the W2 would be employer contributions. On the other hand, if you’re self-employed and do not receive a W2 from the sponsoring employer, each participant’s first $19,000 in contributions for the 2019 tax year would be considered participant contributions, and the remainder deducted for the tax year would be considered employer contributions. That figure changes to $19,500 for 2020. Line 7 also has a space to report any inbound rollovers during the year.

On Line 8, you list Plan Characteristic Codes. Most self-directed 401(k)s will list: 2E, 2J, 2R, 3D. If any participants are self-employed persons not receiving a W2, you’d also list 3B.

Line 9 would be “no,” unless any participants have taken loans from the 401(k). Lines 10 and 11 would be “no.”

Disclaimer: Information provided is for educational purposes only. Nothing herein constitutes legal advice or investment advice. Readers are responsible for their own due diligence in selection of investments, exchanges, and technology platforms.